A self-employed small business owner purchased an insurance contract that will pay a benefit equal to [math]70 \%[/math] of salary in the event that the owner becomes sick and cannot work. The contract will cease at retirement age.

Determine which of the following contracts provides these benefits.

• Term life insurance
• Disability income insurance
• Long-term care insurance
• Single premium immediate annuity
• Critical illness insurance

Copyright 2024 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Answer: B

Key is that benefit is contingent upon being sick, but not related to long-term care. Replacing salary and benefits tied to being unable to work also fit best with [math]B[/math].

Copyright 2024 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Copyright 2024. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.